Source: Adam Smith Esq.
A professor would have little truck with a student complaining their grade should be higher because they worked really hard. The point, of course, is that input is irrelevant. It’s the output that matters.
Clients are no different. They want outcomes, not effort. Yet the legal profession remains stubbornly built on measuring – and charging for – inputs.
Alastair Morrison, the London-based legal consultant named Europe’s Most Innovative Lawyer by the Financial Times in 2019, argues the economic model underpinning law firms is finally facing an existential reckoning.
Donkeys, Carts, and Golden Bricks
Morrison’s metaphor is pointed: the traditional law firm model runs on “donkeys, carts, and golden bricks.”
Each lawyer has a year to carry as many bricks up a hill as possible. The more bricks carried – or the heavier they are – the greater the reward. Partners do very well too. So well that almost all of them insist on being donkeys themselves, even when charged with management responsibility.
“A defining feature of the profession is that those who own and run the business are reluctant to let go of fee earning,” Morrison writes. “The economic model both reflects and reinforces that choice.”
The magic? Brick inflation risk gets passed to clients. They really are golden bricks.
AI Changes the Means of Production
Law firms are now experimenting with machines that reduce both the weight and number of bricks – and carry them quickly and effortlessly. Tools from providers like Harvey and Legora are lightening the load.
Lawyers love them. But an anxiety remains: if fewer heavy bricks are required, how do lawyers stay incentivised and rewarded in the way they’re accustomed to?
The conundrum is structural. Although firms already use data, process, and technology to price deals around client outcomes, the underlying economic model remains an aggregation of inputs. From a client’s perspective, these inputs are neither desired nor relevant.
“If the means of production have changed,” Morrison argues, “then the means of valuing production also has to change.”
Clients Can’t Have It Both Ways
Here’s where it gets uncomfortable for in-house teams.
Many clients currently want two things at once: to pay by the hour, and to pay for far fewer hours. That may be understandable short-term, but it’s incoherent long-term.
If technology materially reduces labour required to achieve an outcome – and the outcome remains what clients value – then value must migrate from inputs towards intellectual capital and technology delivering results.
Morrison’s formula: Seats + SaaS = SaSaaS. Firms delivering lawyers coupled with software products. Clients can’t sensibly insist on paying only for the seats.
The Incumbency Corpulence Problem
The partnership structure may not survive this transition intact. Morrison identifies what he calls “incumbency corpulence” – the power and profitability of law firm incumbency, coupled with annual financial models and generational inertia.
The result: many firms won’t adapt their value proposition or economic model in time to exist beyond the retirement age of partners currently in their early fifties.
“Expect equity disruption to ride side saddle with AI disruption.”
The Real Work Ahead
If the means of production are now Seats and SaaS – and sustaining a healthy legal profession matters – then the real work lies in collectively moving from the golden bricks model to an output-based approach.
Or, as Morrison puts it: “You can hang in there, get to the finishing line, enjoy a good few years of corpulence, and then have fun writing, consulting, and dreaming up metaphors.”
The profession’s future depends on which path it chooses.
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